News: OIG says hospitals overbilled Medicare $1 billion for severe malnutrition

The diagnosis of severe malnutrition has long been in the sights of the Health and Human Services (HHS) Office of Inspector General (OIG). Most recently, an OIG audit performed found that hospitals overbilled Medicare roughly $1 billion by incorrectly assigning severe malnutrition diagnosis codes to inpatient hospital claims.

Previous OIG audits of severe malnutrition found that hospitals had incorrectly billed Medicare by using severe malnutrition diagnosis codes when they should have used codes for other forms of malnutrition or no malnutrition diagnosis code as all.

“Diagnosis codes E41 and E43 (severe malnutrition diagnosis codes) are each classified as a type of major complication or comorbidity (MCC). Adding MCCs to a Medicare claim can result in a higher Medicare payment,” the OIG says in their report.

The audit covered $3.4 billion in Medicare payments for 224,175 claims with discharge dates in fiscal years 2016 or 2017 that contained a severe malnutrition diagnosis code and for which removing the diagnosis code changed the DRG. A random sample of 200 claims were selected for review with payments totaling $2.9 million.

The OIG found that hospitals correctly billed Medicare for severe malnutrition diagnosis codes for only 27 of the 200 claims reviewed, meaning hospitals billed incorrectly for the remaining 173 claims.

“For nine of these claims, the medical record documentation supported a secondary diagnosis code other than a severe malnutrition diagnosis code, but the error did not change the DRG or payment,” the report states.

Hospitals used severe malnutrition diagnosis codes for the remaining 164 claims when they should have used codes for other forms of malnutrition or no malnutrition diagnosis code at all. This resulted in overpayments of $914,128. On the basis of the sample results, the OIG estimated through extrapolation that hospitals received overpayments of $1 billion for fiscal years 2016 and 2017.

To address the 164 incorrectly billed hospital claims in the sample, the OIG recommends that CMS collect the portion of the $914,128 for the incorrectly billed hospital claims that are within the reopening period. They also recommend that, based upon the results of the audit, CMS notify appropriate providers so they can “exercise reasonable diligence to identify, report, and return any overpayments in accordance with the 60-day rule.”

To attempt to recover the estimated $1 billion in overpayments, the OIG recommends reviewing all claims that were not part of the sample but were within the reopening period. CMS agreed with the OIG recommendations and stated it will instruct its contractor to recover the overpayments consistent with relevant law and policies. CMS however noted that the estimated overpayments identified by OIG represent less than 0.5% of the overall payments made for inpatient services during the audit period.

Editor’s note: The full OIG audit report can be found here. To read about prior OIG activity related to malnutrition, click here. To read about the OIG’s use of extrapolation, click here.